August Financial Indicators Report: Slight Increase in Active Interest Rates Expected to Decline in Coming Months

During the month of August, active interest rates, that is, those applied to credits in the financial system, registered a slight increase despite the lower pressures on the reference rate. They point out that declines are foreseen in the coming months in line with the perceived trend because there are some lagged effects after the lowering of the interest rate.

The Central Bank of Paraguay (BCP) published its Financial Indicators report in which it reported that in August, the weighted average of active interest rates in both national currency and dollars had a slight increase compared to the result of July and compared to August from the previous year after reaching 15.38% in guaraníes and 8.11% in foreign currency.

Disaggregated by portfolio, in guaraníes, a monthly reduction was observed in the rate of commercial loans while increases were observed in the interests applied to consumer, housing and development loans. This same behavior was recorded in dollar loans with the difference that a slight decrease was recorded in consumption.

On the passive rates side, the average in guaraníes decreased in monthly terms, but increased year-on-year after reaching around 5.05%. Meanwhile, the interest rates on savings in dollars increased compared to the previous month and compared to the same period in 2022 with 3.32% in August.

Miguel Mora, chief economist of the BCP, explained that the increase in lending rates began to be registered in August 2021 while in 2023 a more downward trend is being observed. “Probably the slight increase that we have in the month is more a question of certain volatility that the registration or measurement of rates presents,” he said. During the press conference, the BCP technician maintained that it is observed that at a more general level there is a trend of moderation heading downwards. He recalled that the reduction of the Monetary Policy Rate (MPR) became effective in August of this year, continuing with September, which has effects on the rate through funding sources mainly in the interbank market.